By David Sims
[email protected]
The news as of the first coffee this morning, and the music
is The Byrds’ “Ballad Of Easy Rider.” Hey, the ‘60s weren’t a total loss:
Today’s topic is “Gee, Why Aren’t The On-Demand CRM Vendors
More Concerned About Microsoft And SAP Eating Their Lunch?”
Witness the latest gloatings ‘n’ ramblin’s from the master of the art, salesforce.com’s
Dear Leader Marc Benioff. We business journalists love this guy the way
sportswriters loved Charles Barkley,
a walking quotable quote. When Barkley was asked if he had any regrets about
throwing a bar patron who’d been hassling him through the front window of the
bar, he said “Yeah, I regret we weren’t on the eighth floor.”
First off, they see
it as a vindication of their business model.
“Fellow
employees,” Benioff starts off, probably because “fellow workers!” was already
taken. “First Siebel, then Oracle, then Microsoft. After months of warming up,
SAP is finally expected to announce an on-demand CRM product this week. Europe’s
most influential technology company is helping us make on-demand the global
standard.”
NetSuite’s Zach Nelson said a while ago, “They will be too
late to the party when they jump in. I don’t care how much money or how many
developers they throw at the problem. But I hope they do announce on demand
products… it will be the ultimate validation of what we are doing.”
And RightNow’s CEO Greg Gianforte says “These companies are
simply recognizing that the hosted model we’ve been delivering more effectively
than anyone else for almost a decade now is the way to go.”
Secondly, they don’t see it as much
competition since the big boys can never focus on on-demand the way on-demand
guys like salesforce.com, RightNow and NetSuite are.
“Is
SAP on the defensive? Are they worried that with few customers actually using
their CRM software, and salesforce.com making significant inroads in their
customer base, their entire business model may be at risk?” Benioff writes. “For
starters, they had better hope that their on-demand offering will win more fans
than their on-premise solution has.”
Because
for all the PR SAP throws out, and while they claim leadership in CRM, “experience
suggests a different story,” Benioff says. “I have often wondered, ‘If SAP’s
CRM software is any good, then why doesn’t SAP use it to manage their own
customer relationships?’”
Benioff
says he’s interviewed hundreds of salespeople and executives from SAP from
around the world, and “each has told me the only CRM system at SAP is an
executive system based on Microsoft Excel. I’m not surprised since I have never
met a salesperson anywhere in the world who uses SAP CRM.”
First
CoffeeSM is hereby soliciting opinions from anybody who actually
uses SAP. All legitimate replies will be printed.
“The dinosaurs of the software industry can make all the
noise they want to. To really come after us, they’d have to completely
cannibalize their existing business. They can’t afford to do that, and Wall
Street won’t let them,” Gianforte thinks.
Benioff echoes this thought: “Mustering the will to turn
your back on the business model that has enriched you, your employees, and your
shareholders has time and again proved far more difficult than solving
technological hurdles. SAP, like Oracle and Microsoft, now risks cannibalizing
its existing customer base.
Thirdly, the dedicated on-demand vendors
see the very size of a Microsoft or SAP as working against them.
“People who haven’t
followed our company closely often ask, ‘Aren’t you worried? A company with the
resources of SAP can bring so much to this battle,’ Benioff says. “But that’s
exactly the problem. Observers tend to overestimate the creativity and
innovation that entrenched technology companies can bring to a particular
problem and underestimate the effect of business model conflicts that lurk
behind the scenes.”
“SAP… would have to completely re-write all of its
applications from scratch in order to build a multi-tenancy architecture to
match ours. And, from a business perspective, they would have to replace this
huge services ecosystem they’ve developed over the years that thrives on
complexity and difficulty,” Gianforte notes.
Siebel’s Bruce Cleveland hinted at this problem when he said
last summer “I think we’ve made our lives a bit too complex and unwieldy, which
is understandable for any organization that grew as fast as we did. Our CEO,
George Shaheen, has stated that simplifying our operations is one of his key
priorities, and I agree that this is one area we must change. His recently
announced moves to simplify our sales organization are an important step in
this direction.”
Fourthly, the dedicated on-demand guys don’t
see the big guys as really being able to do it any better than they do.
“Let’s
state it simply,” Benioff writes: “SAP is an innovation-free company. When
reporters describe the great innovators of this industry, it’s easy to identify
the significant contributions of many of the leaders. For Oracle, it’s the
database; for Apple, the Mac, iPod, and iTunes; for Microsoft, the PC operating
system; for Intel, the microprocessor. But for SAP? I struggle to think of a
single innovation that SAP has contributed. Their code is as bulky and
inefficient as it is expensive and unloved by its users.”
“Can [SAP]
actually afford to convert their billions of dollars in maintenance revenue
into subscriptions? This classic innovator’s dilemma engenders painful internal
rifts and wastes valuable time while customers’ needs languish,” Benioff says.
Gianforte agrees. “These big software companies like to take
the money and run. They have no idea what it’s like to depend on a subscription
model where you must satisfy your customer to get a renewal. We do. That’s why
our renewal rate is 90 percent.”
Fifthly, the dedicated on-demand CRM guys
think Microsoft, SAP et al really don’t understand what they’re getting into
and don’t know what they’re doing.
NetSuite’s Nelson said that developing a successful
web-native product “takes time, money and great software developers. NetSuite
and the others [salesforce.com, RightNow] have been at this for seven years. It
will take an upstart today at least that long to get to where we are. And of
course, we won’t be sleeping during those seven years.”
“Siebel
tried to sell an admittedly inferior on-demand product as an on-ramp to its
on-premise system. It appears that
on-ramps make road pizza out of your business model. That strategy sent an
entire company slouching towards Redwood Shores this week. Will SAP make the same mistake?” Benioff
asks. Gee, whuddya think, Marc?
Speaking of Microsoft Dynamics CRM 3.0, Gianforte said it
has “limited-functionality solution” is designed to compete with other CRM
solutions targeted at small businesses, Gianforte says, adding that while Microsoft
is “late to the CRM game,” they do have “significant resources to gain market
share at the low end.”
But Microsoft isn’t actually hosting the applications, their
partners are and will offer single tenant hosting. “One of the breakthroughs in
hosting is multi-tenancy, multiple applications on a shared set of hardware, which
is the standard for successful software-as-a-service companies,” Gianforte
explains. “There are no economies of scale or margin in single tenant hosting.
This model was introduced in the 90’s and failed.”
“Show us a successful enterprise application software
company that used the channel as its main go-to-marketing strategy? There are
not any,” Gianforte says.
“Microsoft and its partners have traditionally been selling
to IT. CRM needs to be sold to the business unit – and include IT,” he says. “It’s
a completely different selling environment, with a whole new set of languages
and needs that must be understood and used.”If read off-site hit http://blog.tmcnet.com/telecom-crm/
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